Observations on South Florida business
Could Taste of Immokalee be the next Newman’s Own?
You may have read recently about Taste of Immokalee. Launched in 2014 by Immokalee High School students, the company sells hot sauces, spices, salsa and barbecue sauces in supermarkets such as Publix.
Under the mentorship of experienced Naples business leaders, the students from the rural area of eastern Collier County in Southwest Florida learn valuable hands-on business lessons such as developing social-media campaigns and merchandising activities at local festivals, schools and retail outlets.
With backing from Tamiami Angel Funds and the Community Foundation of Collier County, Taste of Immokalee was formed as a B corporation, a Florida corporate structure that lets companies pursue profits and community benefits simultaneously. Traditionally, companies either had to register as for-profit or not-for-profit but the state approved this new hybrid structure in 2014.
The creation of B corporations gives directors flexibility they didn’t have before. That’s because nonprofit and for-profit corporations have strict rules limiting how they can operate, putting directors at legal risk if they don’t adhere to the rules.
What’s encouraging is that this kind of endeavor has already been tested in the market. Although not established as a B corporation, Newman’s Own distributes all of its after-tax profits to Newman’s Own Foundation established to fund charitable causes. Since 1982, that organization has donated more than $530 million to thousands of nonprofits all over the world.
Taste of Immokalee is off to a good start and the benefits are already significant. You can read about those accomplishments in a recent story about the company here.
Photo credit: Taste of Immokalee
We can all agree that driving around Miami can be a miserable experience.
But perhaps the misery is the inspiration that drives technological innovation. That’s certainly the sense the audience got listening to a gathering of executives involved in Miami transportation recently.
Scooters, trains and car-sharing services are pitching their services to car-weary drivers sick of fighting through South Florida’s choked streets and highways. Their data confirm what we know anecdotally. For example, traffic averages 34 miles per hour on Interstate 95 between Miami and West Palm Beach.
The latest transportation entrants are electric-scooter providers such as Bird, car-sharing services such as Getaround and Virgin Trains’ Miami-to-West Palm Beach rail connection.
At a meeting of Refresh Miami on June 11, executives from the three alternative-transportation providers discussed how technology is changing mobility. Refresh Miami is a nonprofit organization that brings together entrepreneurs involved in technology.
Some interesting observations:
•The average ride on a Bird scooter is 1.5 miles;
•In 2020, the new Virgin Trains station in Miami will include a connection to Tri-Rail, the commuter rail line that connects Miami, Fort Lauderdale and West Palm Beach;
•Each family in Miami owns 2.5 cars and the population influx combined with the lack of right-of-way for more roads means more congestion;
•Passengers who fly into Miami select Orlando as their second destination, a reason Virgin Trains is building an extension to Orlando;
•Expect more transportation partnerships with leisure companies such as sports teams and cruise lines to be formed to alleviate congestion;
•State law will be altered to allow scooters to be treated like bicycles so they won’t be restricted to sidewalks and can use bike lanes and roads;
•Public transportation will remain a key player in future mobility plans, even as more private options become available.
Shelton Weeks is blunt about his assessment of Southwest Florida’s economy: The lack of diversification could haunt the region when the next recession comes.
Despite best efforts to diversify the economy through various incentives, Southwest Florida continues to rely on tourism and construction to fuel its economic well-being. It’s worth remembering as memories of the last recession begin to fade.
When the national economy does well, Southwest Florida benefits because people have money to spend on vacations and new homes. When the nation enters a recession, the region suffers worse because people cut back on those expenses, says Weeks, department chair of economics and finance at Florida Gulf Coast University’s Lutgert College of Business in Fort Myers.
For now, the signs of a healthy economy in Southwest Florida abound, Weeks told a recent gathering of wealth managers at CFA Society Naples.
Employment growth, population migration, rising residential values and strong commercial real estate fundamentals point to a vibrant business climate. “When things go well, Southwest Florida tends to do better than the state,” says Weeks, who also is director of the Lucas Institute for Real Estate Development & Finance at FGCU.
Even in a strong economy there are challenges, Weeks cautions. For example, labor scarcity is a problem for employers, particularly in construction. And housing prices have outpaced wages, creating a housing-affordability problem for some.
But Weeks worries that when the next recession comes, Southwest Florida may suffer more than the rest of the state or the nation because of its reliance on tourism and construction. He points to the wide seasonal swings in taxable sales as evidence the economy lacks the kind of economic diversification that would help absorb the shocks of a recession. (You can read the latest economic data from the Regional Economic Research Institute at FGCU here https://www.fgcu.edu/cob/reri/.)
“When the recession comes, it’s likely to be more challenging than the rest of Florida,” he says. “That’s when the music stops.”
If economic growth is going to decelerate as some are forecasting, how will Miami and South Florida fare?
That’s the big question on everyone’s mind. To gain some insight, it pays to chat with the folks at CoStar Group. The company tracks commercial real estate leasing, construction and sales nationally and throughout the major markets of Florida.
Because of their comprehensive commercial real estate data, CoStar is in a good position to forecast market trends that are important to the national and regional economies. CoStar executives recently held a gathering at their Miami office to discuss the latest trends.
Here are some highlights:
•The Miami area’s population is growing at twice the rate of the rest of the country and 61% are working age, higher than the national average;
•About 75% of the population growth in South Florida is foreign-born;
•Miami’s job growth is faster than the rest of the country, helping to provide jobs to new arrivals;
•South Florida’s job-creation drivers aren’t just in tourism. They also include transportation, logistics, construction, business and financial services, education and health care;
•Median household income in Miami is $54,000 a year, 18% below the U.S. average;
•Most newer apartments require $100,000 in annual household income to rent but income growth has outpaced rental-rate growth;
•Construction of new multifamily developments will slow as supply may exceed demand and some projects will get shelved;
•The growth rate in office-market rents has decelerated and suburbs are seeing more development because of transportation problems downtown;
•Retail-rent growth in Miami is in the top five nationally and the region is No. 1 in retail space under construction as a percentage of total supply;
•Visitors account for about 30% of total retail spending in the Miami area;
•The industrial market has performed exceptionally well because of strong demand from online retailers and the lack of land for development. Industrial rent growth has been in the 6% range;
•Industrial space could suffer if trade and the global economy slows.
Comment below if you have any insights. We’d love to hear your experience.
It’s always refreshing to hear the lessons learned from entrepreneurs who have built successful organizations.
Aaron Hirschhorn, the founder of online pet-sitting service DogVacay, spoke at a gathering of Refresh Miami recently and offered insights into how he built the company that eventually sold to competitor Rover.
Among the lessons learned for launching and growing a successful business:
•Ideas are a dime a dozen, but timing matters more.
•Do less stuff better. Decide what you’re not going to do.
•People matter. Teamwork makes the dream work.
•Venture capital seeks investment opportunities in large markets.
•Stay focused on execution.
•Understand the metrics you are measuring.
•Don’t hire assholes.
Check out the YouTube video of the presentation. It’s worth your while.
This is a good time to be the mayor of a big South Florida city, because it seems a day doesn’t go by without news of a significant downtown project.
Decades of migration to the suburbs may be slowing as redevelopment takes off in and around downtown cities from Tampa to Fort Myers, Orlando and Miami. Fueled by a variety of demographic and business trends, downtowns aren’t the urban deserts they used to be after dark as shops, apartments and offices fill with tenants.
Consider a few notable examples:
•Tampa: A partnership between Microsoft founder Bill Gates and former hedge-fund manager Jeff Vinik is planning and developing the $3 billion Water Street Tampa project.
•Miami: Plans for Brickell City Centre keep growing.
•St. Petersburg: Red Apple Group plans a downtown mixed-use development anchored by a 50-story tower.
•Orlando: Here’s the skyscraper’s guide to Orlando. Meanwhile, Interstate 4 is undergoing a major infrastructure upgrade downtown that will include new express lanes, reconstructed interchanges and rebuilt bridges.
•Fort Lauderdale: Riverparc Square will take up an entire city block
•Sarasota: Construction on the Quay in downtown Sarasota is underway.
•Fort Myers: More residential towers are planned downtown, now a lively destination on the Caloosahatchee River.
Changing demographics and technology are big drivers of downtown redevelopment: Millennials on scooters armed with laptops and mobile phones prefer the urban lifestyle. Businesses seeking to employ them are also moving downtown.
But it’s not just young folks who are attracted by this way of life. Older professionals whose children have left home are ditching their long commutes and moving downtown. Meanwhile, retirees are choosing to be within walking distance of restaurants and coffee shops, too.
Cities eager for redevelopment have been soliciting developers with incentives and tax breaks and the federal government is encouraging development with the new tax law’s Opportunity Zones (see the IRS frequently asked questions to learn more.)
Of course, there are always risks to real estate investing. These include economic recessions, overbuilding by zealous developers and permitting obstacles. You can expect some empty condos, shops and offices as demand catches up to new supply, but urban revival in Florida is making it fun to be downtown again.
Real estate folks are generally an upbeat bunch.
But it’s hard to argue with the positive assessment of the U.S. economy by two real estate economists: Lawrence Yun, chief economist and senior vice president of research for the National Association of Realtors, and KC Conway, CCIM Institute chief economist.
The two economists reassured a packed hotel ballroom at the CCIM Commercial Real Estate Outlook Conference in Bonita Springs on Feb. 11. They ticked off reasons the U.S. and Florida likely will avoid a recession in 2019:
•Record job openings, low jobless claims;
•No oversupply of new homes;
•Conservative residential lending;
•No oil-price spikes;
•Fewer interest-rate hikes forecast this year;
•Relatively high consumer confidence;
•Rising home values;
But Yun and Conway highlighted some of the challenges the economy may face this year, though they’re probably not enough to tip the country into a recession in 2019:
•High U.S. debt relative to gross domestic product;
•Relatively high commercial real estate values as indicated by low rates of capitalization;
•Slowing commercial real estate investment sales;
•Fading impact of tax cuts;
•Labor shortages and rising construction costs;
•New accounting rules that will require companies to report real estate leases on their balance sheets;
•Trade wars that could hamper growth and affect business optimism;
•Low corporate spending.
Taken together, the outlook is positive for the nation, according to Yun and Conway. Florida is in an even position to benefit because of population growth, weather, investment in ports and intermodal distribution centers in areas such as Lakeland. What do you think? Leave your comments below.
How much money does it take to launch private passenger rail in Florida and California?
The answer is more than half a billion dollars.
More specifically, Miami-based Virgin Trains has proposed raising as much as $538 million in an initial public offering of stock to acquire, build and operate several passenger-train lines, including the Miami-Orlando-Tampa line formerly known as Brightline and another line linking Los Angeles with Las Vegas.
The latest IPO documents filed with the Securities and Exchange Commission by Virgin Trains offer fascinating glimpses into the Florida train operations and how they might work. To be sure, it will be one of Florida’s biggest public-stock offerings. Finance geeks can read the offering here.
Brightline launched its Miami-Fort Lauderdale-West Palm Beach line last year and it is now building the leg to Orlando, with plans to expand that to Tampa thereafter. The company says it will take three years to ramp up the ridership.
The IPO reveals how costly this will be. Virgin Trains reported $87 million in expenses in the first nine months of 2018 while revenues for that period totaled $5.2 million. When accounting for interest expense, the company lost $87 million in the first nine months of 2018.
But by late 2023, Virgin Trains estimates it will carry 3.1 million passengers on the Florida line from Miami to Fort Lauderdale and West Palm Beach. The Orlando station will boost ridership to 6.6 million and the Tampa extension will carry an extra 2.9 million passengers.
Virgin Trains is banking on several trends. These include attracting commuters from congested roadways, the development of new rideshare services such as Lyft and Uber that can carry passengers to and from stations and the growing dependence on mobile devices for personal and work activities.
Plus, the company can leverage the Virgin brand. The airline Virgin Atlantic carries more than 1 million passengers between Florida and the United Kingdom annually. Meanwhile, Virgin Voyages will be launching cruises from Miami starting in 2020. A station at Disney World in Orlando would ferry passengers to and from Miami in about 3 hours, 15 minutes.
In fact, the Miami-to-Orlando train line satisfies a niche in the transportation market: too far to drive but too close to fly. Still, getting people out of their cars and planes will be a tough marketing challenge. But if anyone can get everyone all aboard, it’s the branding geniuses at Virgin.
Can you function without a car in Florida?
A decade ago, most of us would have answered no. But some people think it may now be possible in densely populated areas of South Florida, thanks to new and improved modes of transportation plus technology. In fact, some condo towers in downtown Miami offer no parking for their residents.
Consider a recent trip from the Brickell Financial District in Miami to a technology conference at the Broward County Convention Center in Fort Lauderdale.
The trip took only an hour, avoiding perpetually congested Interstate 95. From Brickell City Centre, a rider can hop on the Metromover, a 4.4-mile electrically powered automated people mover to the Brightline train station in downtown Miami. The elevated Metromover is free and runs loops around Brickell and downtown Miami.
The Brightline train is the newly launched hourly train service that connects Miami with Fort Lauderdale and West Palm Beach. The stations are brightly lit, there’s free Wi-Fi and well-stocked snack bars. Cost to ride to Fort Lauderdale: $15 to $20 for a one-way ticket.
The train whisks you to Fort Lauderdale from Miami in less than 30 minutes, enough time to check email using the free Wi-Fi onboard. From the Fort Lauderdale station to the Broward County Convention Center is a 10-minute ride with ride-sharing apps Lyft or Uber.
The return trip is just as easy and speedy. Bonus: you can change your train ticket if your meetings in Fort Lauderdale end early.
Is this enough to give up your car? Perhaps. There are still many reasons to keep driving, from grocery shopping to shuttling kids to and from school and events. Another obstacle may be cost: The round-trip travel to Fort Lauderdale from Miami using the train and ride-sharing cost about $50, double what it might cost in gas and parking.
But trains and ride-sharing save the aggravation and lost time sitting in traffic on I-95 and arterial roads. Plus, in about two years, the Brightline train line (to be renamed Virgin Trains after an investment by Richard Branson) will be extended to Orlando. Tampa is next.
More reasons to ditch the car? It’s now possible, at least for some destinations.
At a recent business event in Miami, Brazilian developer Marcelo Kingston asked his audience to guess the nationality of the first buyer at 57 Ocean, the ultra-luxury condo tower under construction in Miami Beach.
This is an important question if you’re involved in real estate in South Florida. Kingston is managing partner of Brazil-based Multiplan Real Estate Asset Management and 57 Ocean is one of the region’s most high-profile luxury residential projects.
Developers such as Kingston face a challenge selling luxury condos now that the wave of South American buyers has ebbed, stung by struggling economies at home and the strength of the U.S. dollar. The greenback’s strength relative to other currencies has spooked Europeans and Canadians, too.
But any entrepreneur can draw lessons here. Fact is, your customers may change over time, whether you’re selling clothes or technical services. Finding them in times of economic stress will help you manage any downturn.
The audience attending the South Florida Business & Wealth event in Miami recently shouted their answers while Kingston shook his head. Brazil? No. Colombia? No. Russia? No. None of the usual suspects.
Then Kingston revealed the nationality of his first buyer: Romanian.
Kingston’s guessing game with his audience illustrated his point that it’s going to be a lot harder to find customers for luxury residences in South Florida. But there’s hope that they’re out there — and they may come from unexpected places such as Romania.
Blogging for entrepreneurs in Southwest Florida (SoWeFlo)